By Art Lieberman
In the past few years a
new method of processing credit card transactions has burst upon the scene.
Because it was first with the technology, a company called “The Square” seems
to have cornered the market on transactions performed through cell phones. The
Square is actually a “dongle,” which the dictionary defines as “a small
hardware device that, when plugged into a computer or other device, enables a
specific copy-protected program to run.”
Users insert the device
into the earphone jack of an Android or iPhone cell phone, then download an app
into the phone, and it’s ready to go. Processing credit cards this way has
several advantages. First, you now can process credit cards where there is no telephone
line, Internet connection, or even electricity. That’s a huge advantage to
people conducting outdoor sales, or at a flea market where no facilities are
present. It is also ideal for small businesses that don’t want to buy a
terminal and want a simple solution for processing low-volume or seasonal
transactions.
Almost more importantly,
it allows SWIPE transactions rather than key entries, and since swiping a card
results in less expensive rates, this is also – supposedly – a less-expensive
method of accepting credit cards. Purchasers can actually sign your cell phone
to complete the transaction.
The Square offers a flat
rate of 2.75 percent on transactions – without any other charges – which seems
to be a huge advantage over other methods of processing that carry with them
additional fees such as transaction fees, statement or maintenance fees, and
PCI compliance fees. So the Square seems a simple solution to so many
processing problems: no equipment to buy, no contract term, no additional fees,
and, so long as you have a good cell phone signal, no problems with
person-to-person transactions. It might even be a good solution indoors where
there IS electricity and a phone. Plus, you don’t need a sales
representative or a credit card processor to help you get started.
Wow, I guess that takes care
of my business! Time to retire . . . but WAIT. . . .
There are several
MAJOR problems. If you conduct your business as swipe transactions, 2.75
percent as a rate is really horrible. There are debit card transactions
that can process at less than half that rate and most credit card swipe
transactions are lower than 2.75 percent. Most are under 2 percent. If you
process more than $4,000 a month, the Square is actually more expensive – and
very few campgrounds do less than that.
As an example if you
process $4,000 using the Square, at 2.75 percent it will cost you $110. Doing
those same swipe transactions for debit and credit cards, at an average of 1.75
percent and adding on a 10-cent transaction fee and, in our case, $18.95 a
month for PCI compliance and maintenance fees and a website to do your PCI
Compliance on (with a $100,000 indemnification in the event of a data breach),
and even adding on $2 in transaction fees (for 20 transactions), it would have
cost you $90.95. At only $4,000 in processing you would have saved $20; PLUS
you’d be PCI Compliant with indemnification. For each $4,000 more in
transactions the savings would increase by nearly $40, since the $18.95 would
be already included.
Secondly, the Square claims
to be PCI-compliant – and we have no information to the contrary – but YOU
probably aren’t compliant, using the Square. PCI regulations require EVERY
merchant who processes credit cards to complete a PCI Questionnaire and
Attestation of Compliance once a year. Somehow, you’d have to do that on your
own.
In truth, however, most
campgrounds rely somewhat on NON-SWIPE transactions like reservations taken
from their website, over the phone, or through a reservation company. This is
not what the Square was designed for. With the Square there is no paper trail
that would be necessary to insure security.
Oh, and by the way, the
rest of us also have dongles that act like the Square and we charge
rates that, as you can see, tend to be less expensive for businesses like
campgrounds.
I guess it’s not time
for me to retire. I’ll just keep working.
Art Lieberman is
President of MCPS for Campground. He has been in the industry for more than 18
years and has been conducting free webinars online and seminars on credit cards
for many State and Regional Association Conventions. He can be contacted at
877-858-9010 or at rvcreditcards@yahoo.com.)
